EURJPY To Test Forex Range Resistance – Feb 2, 2015

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EURJPY To Test Forex Range Resistance - Feb 2, 2015

EURJPY To Test Forex Range Resistance - Feb 2, 2015EURJPY has been trading sideways on its 1-hour time frame, creating a forex range between support at 132.50 and resistance at 134.00. Price has just bounced off support at the bottom of the range and may be due for a test of the resistance once more.

If the top of the forex range holds, price could head back to the bottom once more and continue moving sideways. Stochastic is already indicating overbought conditions, although it hasn’t crossed down yet and reflected a pickup in selling pressure. The pair could still have enough upside until the 134.00 mark before heading back south.

Forex Range Setup

However, an upside break could still be possible if risk sentiment picks up. This could lead to a strong break past 134.00, which might signify further gains for EURJPY. Take note that the rectangle pattern is roughly 150 pips in height, which means that the resulting rally could be of the same size.

Event risks for this forex range trade include the release of Spain’s employment change report and manufacturing PMI. Italy is also set to print its manufacturing PMI today before the euro zone region releases its final PMI. Strong data could lead to more gains for the euro and a potential upside break while weak data could spark an early selloff.

There are no event risks lined up from Japan today, although last week’s set of reports suggests that the economic picture is worsening in the country. This could keep risk-taking in check and continue to favor the lower-yielding Japanese yen unless BOJ officials start entertaining the idea of further easing.

With that, the path of least resistance is still to the downside, as the euro zone economy is faring much worse than Japan. Risk aversion could also keep the Japanese yen supported for the time being. Without any major catalysts for now though, the forex range could still stay intact.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.